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Microfinance of solar systems

Solar energy is a need of both the developed and underdeveloped societies. The former feel the need for it because they want clean energy. The latter generally have no concerns or even awareness about environmental issues, and do not care much about the ‘cleanness’ or ‘greenness’ of solar energy. They will welcome a solar system because most of them don’t have access to electricity.

Solar energy is one possible form of energy that can be provided to remote areas without the need for a large generation and distribution infrastructure, which these poor societies and poor states cannot hope to acquire in the foreseeable future. People are so poor that they cannot buy even a single electric lamp.

The need of these people for solar energy, and their deficiency of funds, becomes an opportunity for financing institutions to invest. To ensure recovery from these poor people, the institutions must resort to microfinancing.

Hence, microfinancing for solar energy benefits three groups at the same time.

Microfinancing: Mode of Operation

Most often, a nonprofit NGO works as a coordinator between a lending organization and individuals who can use loans to buy solar energy equipment. The loan is paid back (with interest in some cases) in installments which may be linked to the monthly bill on fossil fuel which would otherwise be consumed.

The NGO arranges the equipment purchase through selected contractors and arranges warranty repair etc. The net result is that environment is cleaner, more people own solar equipment, and the Financing institution prospers.

Microfinance organizations

Examples of microfianance organizations are Kiva, EIC, and Grameen Shakti.

Grameen operates in Bangladesh where about two thirds of the population, mostly in villages, goes without grid electricity. Lighting is done with kerosene oil lamps. Grameen coordinates between an infrastructure development company-IDCOL (financed at zero interest by the World Bank etc.), needy people, and the equipment suppliers. Households obtain microfinance at flat interest rates for short terms with installments being comparable with monthly kerosene bills.

Grameen Shakti ensures that the supplied equipment is backed by a warranty, trains people, and promotes the the idea through various means. Grameen Shakti has helped millions of people in Bangladesh and hopes to extend its reach further. As a recognition of its good work, Grameen Shakti has won in 2009 the Zayed Future Energy Prize worth$1.5 million in Abu Dhabi, which was established by the late founder and president of the United Arab Emirates, Sheikh Zayed bin Sultan Al Nahya.